Infrastructure spending to soar, shift eastwards

BY Matt Atkins

According to new PwC research, global spending on infrastructure and capital projects is set to rocket, hitting $9 trillion by 2025, up from $4 trillion in 2012. The focus on spending will also shift from West to East, says the new report 'Capital project and infrastructure spending: Outlook to 2025'.

The majority of growth is expected to come from the emerging economies. China, which became the world's top spender on capital and infrastructure in 2009, will be a primary driver. “Emerging markets, especially China and other countries in Asia, without the burden of recovering from a financial crisis, will see much faster growth in infrastructure spending,” said Richard Abadie, global capital projects and infrastructure leader at PwC.

Developing economies currently account for nearly half of all infrastructure spending, and while mature markets will continue to grow, they will see their infrastructure spending shrink from nearly half of the global total today to about one-third by 2025.

Underlying this shift is accelerating urbanisation in many developing countries, which will result in spending growth in sectors such as water, power and transportation. Growing per capita income in emerging markets will also mean a larger middle class that will translate into infrastructure for manufacturing sectors that provide the raw materials for consumer goods and for more and better roads. However, though emerging economies represent the biggest opportunities going forward, CEOs are still apprehensive about the potential for slowdown in these regions. While emerging economies represent the biggest opportunities for infrastructure development and investment, CEOs worry almost as much about a slowdown in the emerging economies as they do about sluggish growth in the advanced economies.

Achieving this predicted growth decade will depend on whether emerging markets can provide the proper conditions for infrastructure development.

Besides the need for available capital, growth markets will need to reduce investor risk by establishing robust governance, a consistent regulatory framework, and political stability. Developing economies must also invest in training highly skilled and low-to-medium skilled workers to support design and construction activities.

Report: Capital project and infrastructure spending: Outlook to 2025

Asset management set for change

BY Matt Atkins

The asset management industry will be radically altered in the next 15 years, says KPMG.

A new report, Investing in the Future, makes a number predictions including that, by 2030, client bases will be fundamentally different as Generation X approaches retirement; the number of players in the global market will halve in the next five years; and big tech firms will make headway into the sector. The report also stresses that asset managers are currently behind the curve on embracing new technology.

Current business models will prove woefully insufficient, according to Tom Brown, global head of investment at KPMG international. "We are on the verge of the biggest shake-up the industry has experienced; and the message to asset managers is clear – adapt to change or your business won't survive. The two biggest issues that need to be addressed are the changing client base and technology, and asset managers need to get to work on these areas now."

Technological investment will be critically import in the coming years says the report. The future needs of clients will be fundamentally different from today, with a growing demand for personalised information, education and advice. However, businesses are currently focusing on the wrong areas.

"Asset managers still have a long way to go to recognise and exploit big data and data analytics," says Ian Smith, financial services strategy partner with KPMG in the UK. "While IT is already attracting a significant amount of investment, it is not being channelled into the right areas. Many businesses are putting their efforts into trying to unpick the complex legacy of disparate systems and technologies while trying to make sure they provide the right level of control to meet increasingly stringent compliance. There is too little focus on building the architecture to meet the business needs of tomorrow."

The report also predicts a shift in the way customers buy investment products. Online purchases are expected to increase, while 'Trip Advisor type' websites will provide buyers with greater opportunities to conduct their own research.

Report: Investing in the Future

Expansion expected in Healthcare BPO

BY Matt Atkins

According to a new report published by MarketsandMarkets, the global healthcare business process outsourcing (BPO) market is expected to see rapid growth in the next five years, doubling in size by 2018. Presently valued at an estimated $92.3bn, the market is poised to grow at a CAGR of 10.8 percent to reach approximately $188.9bn before the decade is out.

BPO is the contracting of specific business tasks such as payroll to third party services. Usually, BPO is implemented as a means of outsourcing  tasks that a company requires but does not depend upon to maintain its position in the marketplace.

The healthcare BPO market is spread across the payer, provider and pharmaceutical sectors, of which pharmaceuticals has the largest share, accounting for close to 80 percent of the market in 2013. Cost reduction is the main driver for outsourcing business functions which include HR services, finance and accounts, claims processing, medical billing and contract research. Healthcare reforms introduced by the Obama administration are also driving the market.

Healthcare BPO is divided into source and destination geographies. The US accounts for the largest share of the market, followed by Europe. The most preferred destination is India, which has the advantage of a high number of healthcare professionals, affordable cost of living, a large patient pool, and decreased time and costs for recruitment.

Overall, the healthcare BPO market is highly fragmented with many small players competing for their share, particularly in India and China, where many entrepreneurs have entered the market. The major players include Accenture, GeBBS Healthcare, Omega Healthcare, Parexel and Boehringer Ingelheim.

In recent years, the market has come under scrutiny by regulatory bodies, and regulatory change in key regions such as the US and Europe is expected to result in increased requirements for payer and provider outsourcing services.

Press Release: Healthcare BPO Market worth $188,856.5 Million by 2018

US oil and gas sees mixed Q1

BY Matt Atkins

In the three month period to 31 March, US oil and gas M&A volume activity reached its highest Q1 volume in over a decade, according to PwC US. Deal value was also up on Q1 2013, with a total of 43 oil and gas deals valued greater than $50m, compared to 41 deals the previous year. However, although volume was particularly high for the period, it slipped by 23 percent compared to the 56 deals of the fourth quarter in 2013. Deal value in the first three months also slumped on the fourth quarter, declining 54 percent from $43bn.

Upstream activity

Increased activity in the upstream sector and a growing foreign interest in US oil and gas assets drove activity, according to Doug Maeir, energy sector deals leader at PwC US. “The first three months of 2014 represented a historic first quarter across the board led by deal activity in the upstream sector, including in the Gulf of Mexico and interest from foreign players,” he said. “Divestures continue to be a major source of deal activity, but we are seeing smaller deals taking place; larger portfolio adjustments have already been made. Smaller deals are also happening in the oilfield services sector as a result of companies selectively looking to fill in the white space by adding assets that can increase productivity and reduce costs.”

Unconventional assets

Shale extraction proved a significant driver of transactions, with 17 deals totalling $6.2bn related to shale plays. “First quarter shale deal activity was on par with what we anticipated as we see the continued shift towards unconventionals,” said John Brady, a Houston-based PwC partner. “A third of total deal value was related to shale plays in the first three months of the year, indicating the ongoing attractiveness of capitalising on the long-term prospects for shale gas.

Mega deals down

Master limited partnerships (MLPs) were involved in 11 of the first quarter’s transactions, representing approximately 27 percent of total deal activity. Financial investors continued to show interest in the industry, and were behind two total transactions, totalling $1.9bn. This represents a 230 percent jump in deal value compared to the same time period last year. Bumper deals were down, however, according to PwC. The first three months of 2014 saw five mega deals, representing $10.1bn. This compares to eight mega deals worth $19.7bn during Q1 2013.

Press Release: US Oil & Gas M&A Activity Reaches Highest First Quarter Volume in More than a Decade